RioZim bemoans 'punitive' royalties

Published: 05 July 2018

ROYALTIES on Zimbabwean-mined diamonds have remained punitive, scaring away investors and disadvantaging local players, diversified resources firm RioZim has said.

The firm's chief executive officer Bhekinkosi Nkomo last week told shareholders that there was need for the country to adopt a more investor-friendly royalty regime, pointing out that the present regime remained the highest in the region.

"… And worse still, the 15 percent is not allowable as a deduction in royalties in tax computations, which makes the royalty effectively over 20 percent because you have to write it back in calculation tax," Nkomo said at the group's annual general meeting.

Just last year, government slashed the royalty rate for all platinum group mining companies to 2,5 percent from 10 percent.

RioZim - which started exploration for diamonds on its 3 000-hectare piece of land in Chivi recently - is in negotiations with legislators and officials in the Ministry of Mines and Mining Development as well as the Ministry of Lands and Rural Resettlement for favourable conditions to ensure the new venture succeeds.

Along with this new venture, RioZim also owns Murowa Diamond Mine (Murowa), which according to Nkomo needs at least $125 million to extend its lifespan by an additional three years, and to push output beyond one million carats per annum.

Murowa rolled out a new mine plan, tripling the plant's processing capacity and investment in the mine, recording a 69 percent growth in volumes and returned to profitability, thus posting a share of profit of $1,4 million compared to a loss of $267 000 in 2016.

The RioZim boss pointed out that for a capital intensive sector as diamond mining, there was need to craft an investor-friendly royalty regime.

"Sadly, the diamond sector is very capital intensive… therefore there is need for a careful look at the structure," he said.

In the past, the RioZim executive has said ground rentals currently being charged by government make exploration uncompetitive and threatens the viability of mining.

Nkomo also said the country needed to clarify on its contentious Indigenisation and Economic Empowerment Act.

"There also remains uncertainty on the indigenisation policy on the diamonds. We know there is some document that will be announced in August, but there is uncertainty…," he added.

RioZim posted an after tax profit of $8,1 million up from $2,5 million the prior year after revenue grew 36 percent to $88,9million on the back of an average gold price of $1 255/oz when compared to $1 251/oz achieved in 2016.

Revenue growth was achieved despite the fact that the Empress Nickel Refinery (ENR) remained under care and maintenance. - fingaz